Australian Product in the International Market of Saudi Arabia - Case Study Example

International Marketing Table of Contents International Marketing 1 Table of Contents 1 Executive summary: 2 2 Introduction: 3 Company background: 4 Country and product market attractiveness: 5 Historical, cultural, environment and buyer analysis: 5 Political, cultural, economic, social and technological environments: 6 Product market analysis: 7 Competitive analysis: 8 Marketing statement: 9 Entry strategy: 10 Conclusion: 11 References: 12 Executive summary: The paper will look at introducing honey, an Australian product in the international market of Saudi Arabia. The main role is to ensure that a successful business can be launched in the Saudi Arabian market, where the market analysis will be conducted and based on this the strategy for the launch will be devised in the proposal. The competitive analysis of the market will also be analyzed along with the entry strategy. The overall effect of the proposal is to ensure that a detailed understanding of the scope of the launch of the export business in Saudi Arabia from an Australian based company can be evolved. The cultural and social implications of the market will also be taken into consideration to ensure that the effect of the socio-cultural factors and variables on the economy and the honey export in the country. The key finding would include understanding of the Arabic market and its potential, how the product could reap benefits based on its Australian expertise and through understanding of the host market and possible ways to develop a foolproof launch plan Introduction: The coming of the era of globalization has led to the development of international marketing and there has been observed that almost all organizations are looking at capturing markets in the international economy through setting up of businesses in other countries. A decade ago the term strategic discourse was strongly supported by all individual companies and organization. It was believed that with the correct management of resources and through a precise study of the market forces the production process could not go wrong (Phipps R P, 2005, pp 3-5). But with time, due to the emergence of multifacet complexities in the market system there has been seen that it is no longer enough for most companies to just manage their resources in a most utilitarian manner. This has not completely disappeared but there have emerged other concerns that it has to accommodate such as competition, forecasting and others. But as has been clearly specified by Karger and Malik in the year of 1975, “The top management of any profit seeking organization is delinquent or grossly negligent if they do not engage in formal, integrated, long range planning.”  In the following paper there shall be developed a detailed business proposal for the setting up of a business venture where an organization which is based in the country of Australia is establishing an export business with the country of Saudi Arabia, where the product which is being exported to the Saudi Arabian markets is Honey. The paper aims at developing the various areas that have to be concentrated upon while developing the business program for exporting honey to Saudi Arabia. The marketing strategy and the management organization will also be discussed and the role that they have played in the development of the organization over the years will be analyzed. Through the conduction of such a discussion one will be able to understand the functioning of an organization and analyze the various sectors that need to be focused upon while running a business. Company background: The company that is going to launch the export business in the market of Saudi Arabia is an Australian based one, which has been functioning in the area for a long time, Harden’s Own Honey. It is a family owned and managed business which has been in the business of honey production, farming, manufacturing and sales since the year of 1858. The company sells honey under the name of Australian Honey Cellars, and this is the name under which the honey will be marketed in the country of Saudi Arabia (Hayden’s own Honey, Online). The company is today looking at enlarging its market and expanding into the international market. It has chosen on focusing on the Saudi Arabian market to begin with, and will concentrate on the exporting industrial as well as ready to sell retail packages of honey to the market. The company aims at capturing a considerable amount of the market in the first 3 years of exporting so that it can build up and retain a certain amount of the market in the country (Gitman, Lawrence J.; Carl D. McDaniel, 2005, pp 115-130). The company has been active since the beginning of the 20th century in the Australian market and is major supplier in the Australian Market. In the past 3 years the company has been able to expand its customer base in the Australian economy and now it is looking at ensuring that it can expand to the international markets (Ennew C T, Reed G V B M R, 1993, pp 59-70). There has been observed that in the past few years the demand for honey in the region has only increased, while the main suppliers, that are the US, have reduced the overall supply to the market due to internal economic problems. The scope of capturing the market is huge. Country and product market attractiveness: The product that is being exported is Honey, and the survey of the Arabian market reflects that honey is one product which is always been high in demand in the economy. The scope of the market is vast as the country imports almost 90 tonnes of honey every year, although the actual figure of import may be higher given the fact that most of the small operations and organizations do not register with the Ministry of Commerce, and all the honey is imported from outside the country meet the demand of the local market in the region. There has been observed that the role of the export in the honey market in the country is vast, where the annual consumption of the country’s market is around five thousand metric tons of honey. Historical, cultural, environment and buyer analysis: The history and the social culture of the country reflect that the consumption of honey has always been a part of the region, where the average Arabic family consumes almost 1 kg of honey in a month. There has been observed that the consumption of the product is higher during the festive seasons, and therefore the imports during this time increase almost by 80%. In fact the Koran which is the holy book of the religion Islam has specified that honey has healing properties and this may be one of the reasons that the consumption of honey is high in the region, as it is related to the culture of the region as well as with the social activity of the people living there (Griffin, R and M. Putsay, 1998, pp 37-62). The fact that the consumption of the product is so high in the region adds to the attractiveness of the product in the region (Bhasin R, 1997, pp 167-180). This combined with the fact that the supply from the main supplier to the region, which is the US, has decreased in the recent years only adds to the attractiveness of the product and the market to launch a new business venture in the region. The product is known in the region for its medicinal powers as well as restorative power. It is 8usually incorporated in the meals for its sweet taste. Political, cultural, economic, social and technological environments: While making an entry into the Arabic market, it is important to understand the political, cultural, economic, social and technological environments of the same. It has to be born in mind that Arabic market is not a single entity or a specific market but a sort of conglomeration of many markets dominated and influenced by specific political, cultural, economic, social and technological environments. Arabic market place consists of North African and Middle Eastern speaking nations; with a population of around 250 million in Arabic speaking nations alone. Whatever the case and whichever the region, the market is predominantly Muslim with faith deeply vested in Islam. Economically speaking, the market can be divided into oil and non-oil based or Gulf and non-Gulf countries; known to the outside world something as neo-rich. Collectively Arabic nations as a place to do business with form a very growing market with average per capita income of more than US $3,000 (Stanat, 1998). But despite that the market is fraught with a number of difficulties primarily stemming from the cultural and social aspect. This is where differences in Australia’s and that of Arabs macro-environment can pose a problem. Some problem areas in this export from Australia to Arab nations could be a) absence of widespread product acceptance, b) issues with product design and packaging, c) incorrect or inappropriate language translations, d) differences in use of measurements, e) distribution problems, and f) lack of correct advertising methodology. But the very basic understanding of these problems areas in the first place can go a long way in making the venture successful. Two things pertaining to development and marketing are to be ingrained in mind. One the product comes with refined backing in terms of research and development, manufacture, planning and marketing from its base in Australia. That could be an advantage. And this advantage can be used to create a greater impact in the launch destinations if the destination is thoroughly understood in terms of its political, cultural, economic, social and technological environments. Product market analysis: The market of the product is at the moment expanding, as has already been specified in the section above. The increase in demand in the region has been observed to be around 4.7% per annum, which gives a wide margin for the company to grow each year if it looks at capturing a margin of the market. The scope of the growth and returns in any investment in the region is high. This is only emphasized by the fact that the economy of the country is today growing and expanding (Martos I, Ferreres F, Tomás-Barberán F, 2000, pp 1498-502). There has been observed that the economy of the country is today growing rapidly due to the fact that the government has invested in developing the infrastructure of the country, and is attracting foreign investment. This has led to the financial inflow in the market, which makes the prospectus of a company in the region becoming positive in the future, as the development in the region is high (O'Sullivan E, 2003, pp 326-330). The imports of honey in the region account for only 9 to 10 percent of the total consumption in the area, but it is still around 90 tons a year. Saudi Arabia imports honey in bulk (in 200-kilogram drums) and ready-to-sell retail packages ranging from 125 grams to 3 kilograms. Independent importers or commission agents distribute the bulk product to food processors and repacking factories and retail packages to wholesalers and groceries (Berman S 2000 57-69). The country imports honey from mainly from US in the past, and today it is diversifying to other countries such as New Zealand, Turkey, Germany and others. These are the major exporters to the country for the product honey. Competitive analysis: It has been observed that the US has been the predominant supplier of honey to the region since the late 20th century, where it has been able to capture the growing market. In fact the figures from the study reflect that in the year of 1995 the sale of the honey grew from 87 tones in 1994 to 333 metric tons. Other countries such as New Zealand and Germany have also been able to capture a certain share of the market (Cummins J G, Hubbard R G, 1994, Paper No 4). But as has been observed the supply from us has been dwindling in the recent years, and the demand is growing. There has been observed that Brazil is also looking at expanding to the country, and the company will face serious competition from its Brazilian counterparts. But there has been observed that the company has certain advantages over the local as well as the international competitors as the consumers in the region have preference towards flavored honey, and the company boasts of its own unique flavored and characterized honey which gives it an edge over its competitors in the market (Barry D 1997, pp 429-52). Marketing statement: The marketing scheme of the organization is one of the most important strategic operations that are carried out by the corporation. The marketing scheme of the organization is a comprehensive one which looks into the external audit and the internal audit of the organization (Karger, D. W., & Malik, Z. A. 1975, pp 60-64). The fact that has to be realized is that the organization is the leading organization in the honey production in Australia. This allows it to draw from a number of cultures and it has a deep understanding of various cultures. This is utilized by the organization to develop the best methods of functioning, and it can incorporate different methods of functioning. This allows it to have an edge over the other organizations which lack such insight. Also it has various segments of accommodation, which caters to various stratas in society, and this allows the organization to have a large customer base (Zeithaml, Parasuraman & Berry 1990, pp 73-86). The external threat that it runs due to being as an emerging global organization it will receive only a limited amount of concessions from the various governments and this allows it to manage its financial risk also in the face of economic instability. Thus, the marketing team of the organization can draw upon these factors to capture the market in the long run. The overall strategic position of the organization is a strong one, as it provides greater services to the customers in comparison to the other organizations in the sector. It aims at capturing the market which has been freed recently due to the reduction in supply from the US in the region, while at the same time capitalizing on the fact that the market demand is only increasing. It aims at capturing at least 15 % of the honey market in the first 3 years and then expanding its customer base with time. Entry strategy: The entry strategy is the most important for the business to succeed and sustain itself in the long run. There has been observed that the laws of the land are such that the retail-packed honey is charged a 12-percent import duty (Froot K, Scharfstein D, Stein J 1993, pp 1620- 1648). Honey destined for industrial use is normally exempt from any duty, but the importer must obtain a waiver from Customs. The Saudi Arabian Standards Organization (SASO) of the Ministry of Commerce imposes quality standards. Honey entering the country must include labeling that indicates the product name, origin, weight, production and expiry dates and the importer and exporter (Rosemary S, 1998, pp 37-50). The company will collaborate with the local retailers and will export the retail packed honey to the retailers for the first 2 years, and once it has been able to capture a certain amount of the market, the organization will set up its own retailing stores in the country. Along with retailing the honey products the country will also sell industrial honey for the medicinal purposes, which does not have any duty imposed upon it. This will allow for generation of greater income from the region while the company establishes itself in the region (Verlag R H, 2009, pp 5-14). The company will collaborate with the regional suppliers to ensure that its entry is secured, and the products are marketed in a knowledgeable manner, and within two years, once the traditional market strategies are better comprehended the company will look at venturing on its own. Conclusion: As this paper has detailed above, it can be concluded that there are certain things that can prove of tremendous advantage to this launch. One is company’s own Australian expertise and reputation with matchless technological knowhow on production of the finest honey, and second is its unique flavoured honey that hasn’t yet made any inroads into Arabic market; even though there are many suppliers out there, primarily the US, whose honey has been used in the region. Also, company’s decision to shake hands with local strategic partners to market the product is noteworthy since that way the company can leverage these partners’ local reputation to garner customer base for its products. 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Putsay (1998). International Business: A Managerial Perspective, 2nd edition. Reading, Mass.: Addison-Wesley, pp 37-62. Harden’s own honey, accessed on September 27, 2010 at http://www.harden.com.au/business.html Karger, D. W., & Malik, Z. A. (1975): Long-range planning and organizational performance. Long Range Planning, 8(6): 60-64  Martos I, Ferreres F, Tomás-Barberán F (2000): Identification of flavonoid markers for the botanical origin of Eucalyptus honey, J Agric Food Chem Vol 48 no 5, pp 1498–502 O'Sullivan, E (2003) Bringing a perspective of transformative learning to globalised consumption, International Journal of Consumer Studies, 27 (4), 326–330  Phipps R P (2009): Speech on international honey market to American Honey producers convention, American producer organization meet, 2009, pp 3-5. Rosemary S (1998), Saudi Arabia’s taste for honey, AgExpoter, Wednesday, July Issue, pp 37-50 1998 Stanat, R. (1998). Global Gold: Panning Profit in Foreign Markets, AMACOM. 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